USA - IOWA Law and Practice Contributed by: David M Erickson, Robert J Douglas, Jr, Christopher S Talcott and Amy S Montgomery, Dentons Davis Brown
ers based on the entity’s profits. In contrast, a corporation must pay a corporate income tax on its profits, and when dividends from those profits are issued to its shareholders those divi - dends will be taxable income to the individual shareholders. 5.3 REITs There is no authority for the creation of a real estate investment trust under Iowa law. 5.4 Minimum Capital Requirement There is no express minimum capital require - ment to form an entity to invest in real estate under Iowa law. However, the failure to properly fund an entity may be a factor considered by a court in determining whether to “pierce the cor - porate veil” and impose personal liability on an entity’s equity owners for liabilities of the entity. 5.5 Applicable Governance Requirements See 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity . 5.6 Annual Entity Maintenance and Accounting Compliance All entities that are formed by filing with the Iowa Secretary of State must file biennial reports with the Iowa Secretary of State for a filing fee that varies by entity type, but in each case is less than USD100. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time Generally, the only method by which another can occupy real estate without purchasing the property is through a lease. However, a licence
agreement or easement agreement will allow a party to use property without entitling the party to exclusive occupancy or possession. 6.2 Types of Commercial Leases The two primary methods of commercial lease are differentiated by the method of rental pay - ments. Net Lease Under a “net lease” arrangement, the tenant will pay base monthly rent, as well as the tenant’s share of operating expenses as additional rent. Additional rent typically includes items such as the tenant’s share of property taxes, insurance, and expenses related to the maintenance and repair of the common areas on the property. The usual net lease will also include a true-up pro - vision to account for any unforeseen variance in the operating expenses which occur over the course of the lease year. Gross Lease A “gross lease” arrangement obligates a ten - ant to pay only monthly base rent without the additional rent. In a gross lease, the landlord accounts for all expenses as part of the monthly base rent, which requires the landlord to have a firm grasp on anticipated operating expenses of the property if the landlord wishes to enter into a multi-year lease with the tenant. Ground Lease Though not used as frequently, in a ground lease, a lessee lets real estate from a lessor for the purpose of constructing improvements upon the leased ground. Lease arrangements vary as to who will be deemed the owner of the improve - ments at the expiration of the ground lease.
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